Canada: Contests On The Internet

The Internet has become a popular and profitable way for companies to advertise their goods and services to a very wide audience. As more and more contests are being conducted over the Internet, it is important to look at steps that should be taken to ensure compliance under the law. Since we know that the laws of Canada of general application, such as the Criminal Code, apply to any illegal services provided over the Internet, we can extrapolate from those laws to provide guidelines that should be followed when your company decides to run a contest over the Internet. The following guidelines will only deal with contest law on the Internet as it differs from contests run off-line.

Avoid Jurisdictional Disputes

One of the biggest problems raised by the Internet is that advertising, promotions and contests know no national bounds. Canadians who are running contests on the Internet must ensure that the contests are permitted in the countries from where contestants are permitted to enter. The issue becomes even more complicated when Canadian or foreign laws relating to contests are not complied with because the issue of jurisdiction arises. Where are these legal actions commenced? Who ought to be sued? Does the Canadian or foreign country have the jurisdiction to commence an action against the company who has not complied with the laws of the land? To resolve these issues, it is best if certain measures are taken.

Perhaps the most apparent measure is to provide a choice of law notice to alert users of the jurisdiction of the web.

A disclaimer on the web site should also be used to establish who is eligible to participate in the contest. For instance, you should specify that the contest is open to all Canadian residents, including or excluding Quebec, who have reached the age of majority in the province of residence. Since Quebec has its own laws relating to promotional contests, special consideration must be given to contests open to its residents.

Limit Eligibility

The disclaimer mentioned above not only helps with the jurisdiction issue, but is also important for a number of other reasons.

Canadian laws are only applicable in Canada. You would have difficulty enforcing rules that you have set (for instance, a skill testing question) against non-residents since the laws would have no bearing on them. Further, contests per se may be illegal in some foreign countries.

Next, while there is no federal law preventing the offering of promotional contests to children, contests open to children raise special considerations. For example, a child under the age of majority cannot be legally bound by a contract unless the child is over 16 and the contract is for necessities. Therefore, children who enter contests are not legally bound by the contest rules nor are they bound by a standard release.

Adequate and Fair Disclosure

As is required by the Competition Act, it is necessary to have adequate and fair disclosure of any fact within the knowledge of the advertiser that affects materially the chances of winning. While a web site may contain a set of mini-rules, (including: the number of prizes and approximate retail value in each category; the odds of winning each type of prize; the contest closing date; the address, location and/or phone number from which complete rules can be obtained; and, the fact that no purchase is necessary) it would be wise to include a link to a complete set of contest details.

Avoid Becoming an Illegal Contest under the Criminal Code

The Criminal Code sets out certain prohibitions for contests where entrants must pay valuable consideration to enter. Until such time as Internet access is universal, when accepting entrants into the contest, the following tactics should be employed. Make sure the entries are entered by name and not by e-mail address or by attribution to the holder of the e-mail account. It is also advisable to limit access to one entry per person, rather than per Internet address. In the alternative, you could allow for entry to the contest through snail mail. However, you must ensure that mail entries have the same chance of winning (i.e., equal integrity) as Internet entries.

Include a Glitch Disclaimer

Since technology is not without error, or hackers - as we have seen recently, it is very important for you to include a technical glitch disclaimer. Such a provision should at a minimum provide that you are not responsible for entries lost in cyberspace. It should probably also provide the sponsor’s right to cancel the contest because of viruses or bugs; the ineligibility of lost, interrupted of jumbled entries; a disclaimer of liability for bugs or technical failure; and, a disclaimer of liability for any damage to the user’s system. If the sponsor’s right to cancel provision has to be enforced, this should not affect the off-line portion of the contest.

Limit Number of Entries

Technology permits even the most naive user to generate multiple entries with the click of a mouse. As such, we generally recommend that Internet contests limit the number of entries per person - either per day or per contest. Software can be accessed to throw out multiple entries that do not comply with the contest rules. This precaution will also help avoid potential technical failures or blocking of the site by overzealous entrants.

Brenda Pritchard is the leader of the firm’s Advertising Law Practice Group and practices exclusively in the area of Advertising and Marketing Law in the Toronto office. She can be reached at (416) 862-5716 or by e-mail at pritchab@gowlings.com.

Shelley Samel practices in the area of Intellectual Property law, with emphasis on advertising and marketing law and litigation, in the Toronto office. She can be reached at (416) 862-4494 or by e-mail at samels@gowlings.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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